European firms take hard line with U.K. banks

• More than 20 European business associations and companies interviewed by Reuters say they back their governments’ position that Britain’s banking sector can only enjoy EU market access post- Brexit if the country still follows the bloc’s rules.

Britain wants a trade deal that gives London’s financial district, known as the City, access to EU clients while allowing the government to restrict migration from the bloc — something at odds with the basic rules of the European Union.

Senior lawmakers in the British government have said they expect European business groups to support their position because they need access to the financial services the City provides.

But interviews with companies and trade bodies across Europe suggest the most important thing for business leaders is maintaining a single market with a single set of rules that includes the four freedoms: free movement of workers, capital, goods and services.

They are less concerned about losing access to the City of London.

Companies i ncluding Deutsche Post, Daimler and Fiat Chrysler said they did not see significant disruption if the City loses free access to the EU market.

“We have taken a very clear line that the integrity of the four freedoms must be observed and that there is no cherry picking,” said Markus Beyrer, Director General of Business Europe, the umbrella body for the biggest EU business federations. “This is a very clear message we get from our constituency.”

The conflict of views gives an early indication of the difficulties facing both Britain and the European Union in the divorce negotiations to come, with both sides having little room for concessions.

Britons chose to l eave the EU in a vote driven in part by a desire to curb immigration. The government, which has pledged to respect the people’s will, will face an outcry — among both t he general public and eurosceptics in its own ranks — if it allows free movement from the bloc.

The EU is also in a tight spot. Continental businesses, despite their opposition to a U. K. exemption, rely on London to help arrange share sales, bond issuances and M&A deals. But officials fear if Britain is allowed a special deal, then other members states might demand bespoke relationships, putting the single market and the Union itself at risk.

Britain exports more financial services than any other country and hosts the highest number of headquarters of financial services companies, and firms in related professional services such as law, than anywhere else in the world, according to a report from lobby group The City UK last month.

But some analysts said that by taking an overly optimistic perspective of support for its arguments in Europe, the British government risked leaving the EU with no agreement on market access.

A s pokesman f or t he Treasury said: “Our position is absolutely clear, we want the best deal for trade in U. K. goods and services.” He declined to comment on previous government comments about the stance of European corporate leaders.

European business groups say they benefit from barrier- free trade with the City of London, using it for fundraising, repackaging receivables like car loans and mergers advice. They acknowledge shifting to financial services providers in Frankfurt and Paris could push up costs.

WE WANT THE BEST DEAL FOR TRADE IN U.K. GOODS AND SERVICES.